Having about 19% of global explored uranium reserves – 1.5 million tons, Kazakhstan occupies the first place based on its production and plays one of the key roles in the global nuclear market. The strategic plans of the Republic include the creation of the full range vertically integrated complex of nuclear fuel cycle: from production of uranium to the nuclear power station construction and waste fuel utilisation.

The uranium industry with developed infrastructure and high quality personnel was formed in Kazakhstan during the Soviet period. The prospect works for uranium deposits were carried out by 2 departments and production was ensured by 11 ore departments. The ore processing and uranium concentrate production were made at the Tselinnyi Mining and Chemical Plant. Fuel for nuclear power plants, metallic beryllium, tantalum and products based on them, hydrofluoric acid and other products were produced at the Ulba Metallurgical Plant.

The entry of Kazakhstan to the world uranium market after the collapse of the Soviet Union required the formation of a unified national operator, which could ensure the control and management of all financial, industrial and commodity resources of the sector. This structure was created in July 1997. The exploration company Volkovgeologia, 3 Mine Groups (Stepnoe, Central, and the Sixth) and Ulba Metallurgical Plant merged in the NAC Kazatomprom JSC.

Kazatomprom started to promote not only the export of domestic uranium, but also to rehabilitate high-tech production of beryllium, tantalum and niobium products. As a result, in December 2009, Kazakhstan came out to the top in the world uranium production. This result was achieved both through the development of old deposits and putting into operation of the new ones.

Currently, commercial production of uranium in our country is conducted in 9 uranium deposits in three regions: Shu-Sarysu (60.5% of total reserves), Syrdarya (12.4%) and North-Kazakhstan (16.5%). Kazatomprom plans to start uranium production in the Zhalpak field by 2014, where the output will be at least 500 tons per year.

In general, over the past 5 years, the level of uranium production in Kazakhstan increased in 2.5 times, reaching 20.9 thousand tons in 2012. Whereof 11.9 thousand tons fall to the share of Kazatomprom, including equity interests in subsidiaries and affiliates. The volume production of tantalum products was 213 tons, niobium – 43 tons, and beryllium – 2 526 tons. However, despite of high production performance, the revenue of the company decreased by 3.7%, falling to 198.9 billion KZT. The reason for this is unclear, because the data on the actual selling price of uranium and the sales volume are restricted. Furthermore, Kazatomprom itself refrains from commenting on the subject so far.

Currently there is no nuclear power in Kazakhstan. Although the possibility of construction of a domestic nuclear power plant as one of the options for additional generating capacities to address the problem of energy deficit, has been discussed for over 10 years. At the same time both the nuclear power plant construction period and its location have been repeatedly changed. Perhaps under the influence of the rapidly growing uranium production, sales of which brings considerable income, the topic of development of domestic nuclear power faded into insignificance.

In the meantime, the products of domestic uranium industry are fully export-oriented. In particular, they are sold by such companies as China Nuclear Energy Industry Corporation and CGNPC (China), Nukem Inc (USA), Korea Hydro & Nuclear Power Company (South Korea) and Itochu Corporation (Japan), which account for 86% of our total exports.

Horizons of Cooperation

Today NAC Kazatomprom is a large diversified holding company, which consists of 73 companies. However, if in the Soviet Union there was a complete nuclear fuel cycle (NFC), now in Kazakhstan there are only its separate parts, namely: natural uranium production, refining (primary treatment) and production of fuel pellets. All other processes of the fuel assembly are performed today in Russia. Thus, Kazatomprom is actually presented only in the field of mining and production of uranium concentrate, which is mainly used as a raw material for the manufacture of nuclear fuel. The share of these products now accounts for 70% of company revenues.

Therefore the main task of Kazatomprom is the creation of missing links of NFC, which will allow to obtain export-oriented products with the highest added value. For this purpose, Kazakhstan performs diversification of markets and partners, actively interacting with the leading global players: SXR Uranium One Inc. (Canada), Marubeni Corp. (Japan), Guangdong Nuclear Power Group (China), New Power Systems Ltd. (UK) and, of course, with Rosatom (Russia). According to experts, the implementation of a program for foundation of domestic vertically integrated company will allow to increase the value of its final products in three times.

A significant raw materials base is a cogent argument of the national operator in building relationships with its partners in uranium business. In exchange for shares in their fields the company gets access to the technologies needed for the development of all stages of the nuclear fuel cycle. Thus, today, Kazatomprom is actively developing uranium enrichment technologies in the framework of an integrated program of Russia-Kazakhstan cooperation. At the same time, about one third of proven reserves of natural uranium in the territory of the Republic are developed by Russian-Kazakhstan joint ventures: Zarechnoye, Akbastau, South Zarechnoye and Karatau. In November 2012, Kazatomprom and TVEL JSC (Rosatom’s Fuel Company) signed key documents required to implement the Alternative project “Centre for uranium enrichment”. The establishment of joint ventures in Kazakhstan for uranium production in the volume of 6 thousand tons, and in Russia – joint ventures for its enrichment with a capacity of 5 million SWU (separative work units) are provided for within the project’s framework. The beginning of implementation of the program is expected in the first half of this year.

Japanese and Chinese companies which are also involved in mining projects in Kazakhstan obliged to provide certification of uranium dioxide powder and fuel pellets produced at the Ulba Metallurgical Plant for the future sale in their markets.

Kazatomprom plans to launch the project on fluoridation of uranium, which precedes its enrichment in the NFC production chain, with the help of partners from the Canadian Cameco, based on the facilities of the Ulba Metallurgical Plant. The production capacity of the future line is expected to be 12 thousand tons of uranium hexafluoride per year.

Unfortunately, the implementation of the project was delayed. So, it was initially expected that feasibility study on the creation of a conversion joint venture with Cameco will be completed as early as by the end of 2007. But later these deadlines were shifted. In particular, it was reported that the start of production is scheduled for 2016, and output at full capacity for 2018. If the plans come true, then the share of Kazatomprom on the world market for conversion will be at least 10%.

The work of Kazatomprom and the French company AREVA on the design of nuclear fuel production in the territory of our republic is in progress.

In November 2012, in Stepnogorsk the launch of new industrial complex for the production of bulk concentrates of rare earth metals of the joint Kazakhstan-Japan enterprise Summit Atom Rare Earth Company (SARECO) took place. Given that the joint venture is provided with the sufficient volume of raw materials, a separative production will be created on its base as late as by 2015, and the production of magnets on the basis of rare-earth metals will be arranged within a few years.

Despite the fact that the main activity of Kazatomprom is the uranium production, the company develops an alternative energy as well, intending to run industrial production of solar and wind power plants by 2015. The first steps in this direction have already been made. In particular, the mining of quartz was established and the production of metallurgic quartz was resumed in the Ushtobe village of Almaty region, and in December 2012, a subsidiary of NAC Kazatomprom JSC, Astana Solar LLP launched a plant for production of photovoltaic modules. The achievement of design capacity is planned for the first quarter of this year.

Favourable market conditions

One of the main uncertainties that could have a restraining influence on the ambitious strategy of Kazatomprom is the rate of the further development of the global nuclear industry and the trends of uranium prices in particular.

It should be noted that uranium is not an exchange commodity that is why market participants use price quotations for uranium oxide concentrate, published by the authoritative analytical companies such as Nuclear Intelligence Weekly, Ux Consulting and TradeTech. In turn, they determine them on the basis of interviews with buyers and sellers, and other available market information. This is the way in which an independent – spot-market of single sales of natural uranium is formed, where about 20% of the world's end-users supply their needs. The remaining part of natural uranium is sold through the restricted transactions under the long-term contracts. And these bargain prices are usually higher than spot prices.

After the accident in March 2011 at the Japanese nuclear power plant Fukushima-1, the world uranium market was suppressed by the uncertainty in demand, caused by this disaster. Moreover, market quotations for uranium have been declined steadily in the second half of 2012. Thus, if in May, according to UX Consulting, average spot price per pound of uranium oxide concentrate (U3O8) kept at the level of $52, then in November it collapsed to a minimum for last few years – $40.75.

Meanwhile, experts say that, spot uranium prices have reached the “bottom” and begin to recover. In particular, the Uranium One Company forecasts the average uranium price in the current year at the level of $56.7 per pound. Analysts polled by Bloomberg, think that the cost of uranium oxide concentrate will increase up to $62.6. In turn, the JP Morgan Bank in Australia expects that prices will increase on an average up to $58 (or even to $70) per pound in 2013 and to $85 – in 2014. According to the analytical publication Nuclear Intelligence Weekly, this year the pound of uranium oxide concentrate will cost $55.5, $58.1 – in 2014, $61.20 – in 2015, and $63.65 – in 2016. In this case, the barrier of $70 per pound will be broken in 2020. The Rosatom Company also expects the uranium prices increase to $83.15 per pound, but only by 2025.

The prerequisites for such optimistic forecasts are obvious. According to Reuters, in Japan 3 nuclear reactors were brought out at the full operating capacity. Moreover, a change of government which took place in late December holds out hope for the revival of the Japanese nuclear industry. New Minister of Energy Toshimitsu Motegi said he is willing to give the green light to restart shut-down plants, if their safety is confirmed. Note that prior to the March accident there were 54 atomic power generation plants in the Land of the Rising Sun. Of course, the launch of shut-down reactors will give upward trend in uranium prices, as producers of nuclear fuel will count on Japanese nuclear renaissance and reduced fear regarding nuclear power plants in other countries.

There are about 400 reactors operating in the world today, about 60 are under construction in 15 countries. The significant growth of nuclear energy in India, Russia and South Korea will maintain the demand and prices for uranium. But the main driver of demand for uranium will be China: even today there are 29 operating, and 51 being built out of 120 planned new nuclear power plants. In addition, at the end of 2013 expires the Russian-American program “Megatons to Megawatts” (the use of Russian weapon-grade uranium), which will reduce the supply of uranium to the global market. If the share of nuclear power in the world generation begins to increase again, then the return of prices to higher levels of 2007–2008, that is $80–100 per pound of uranium, is quite possible. Thus, in the long term the situation looks very positive on an international scale.